Benefit Premiums
Katie
3 Posts
My company, like the majority of others, pays a large portion of the employee's monthly health benefit premiums. The employee pays a small portion for single coverage. If an employee terminates, a pro-rated amount of the company paid portion is deducted from their final paycheck. Reason given is because the company pays their portion at the first of the month. If an employee resigns, the company should be able to re-coop a portion for the remaining days in the month that the employee will be covered, but no longer employed.
I am relatively new at my place of employment as well as being responsible for benefits administration and have never heard of this practice before. Is this a normal practice? Please help.
I am relatively new at my place of employment as well as being responsible for benefits administration and have never heard of this practice before. Is this a normal practice? Please help.
Comments
Just out of curiosity, do you find that most employees leave at the end of the month?
I would be very careful about what deductions are made against an employee's final paycheck. In MA, this would probably not be an acceptable practice under our Wage & Hours laws because it could be seen as a withholding of earned wages. When your employees enroll in your employer group plans, they are agreeing to accept responsibility for the employee portion of the premium. The employee contribution, then, is an "authorized deduction". Do you obtain their agreement to be held responsible for the employer's portion upon termination, as well? Even this would most likely be invalid in MA, because the Wage & Hour enforcement office interprets the law to bar employers from seeking a waiver from employees that would authorize a deduction from a final paycheck to reimburse for company equipment or some other form of "debt" - like the prepaid employer contribution.
Like Don Avery said, a risk analysis might show that your costs (in admin. labor and vulnerability to a failure to pay wages charge) may be higher under your current practice than they would be if you just let an employee go in peace.
A quick (anonymous) call to your local Wage & Hour enforcement office will give you the best answer in your state.
effective the first of the month following their date
of hire. then you don't have to get anything back.
(BTW,I have been in benefit for 8 years and have never
heard of such a practice.) Good luck!